There’s been a shift of focus to crypto derivatives trading amid the spike in the price of Bitcoin (BTC).
Accordingly, the sector noted over $40 billion in trading volume over the past thirty days. According to the Financial Times report, the growing interest in digital asset exchange-traded funds (ETFs), regulatory compliance by derivatives market participants, and high investment yields are responsible for this spike.
The report added that investors are flooding this ecosystem as regulated exchanges leverage their popularity to launch new derivative products.
Surge in Crypto Derivatives Trading
Moreover, data from CCData (a leading platform for real-time cryptocurrency data) highlighted that the market for cryptocurrency derivatives is growing significantly and currently accounts for 71% of all trading volume in digital assets. This change reflects investors’ increasing interest in derivative products as a substitute for trading the crypto market directly.
Crypto Derivatives Trading Volumes. | Source: CCData
Notably, CME Group is at the forefront of the crypto derivatives market, setting records for open interest and transaction volume over the past year. Last Friday, CME launched a new Bitcoin futures contract in response to increased demand from institutional investors.
This move would further strengthen the platform’s presence in the derivatives market.
New Entrants to the Market
With investors’ increasing demand for crypto derivatives, exchanges are launching new products to meet this demand. For instance, the Dutch platform D2X will launch its product next month, and in the upcoming year, London-based companies One Trading and GFO-X are anticipated to follow suit.
Furthermore, Kraken recently added a derivatives trading option in Bermuda to its list of services. Consequently, Kraken has become a strong competitor with other major players like CME, Binance, and Bybit.
Many investors are looking for safer alternatives as a result of the demise of major lending platforms like FTX. With the disappearance of unsecured lending, market players are turning to derivatives to increase leverage without taking on the risks of unsecured loans.
By leveraging derivatives, investors can gain exposure to leading tokens like BTC and ETH for a fraction of the cost of holding these assets directly. Meanwhile, trading behavior has been impacted by increased regulatory scrutiny from the US Securities and Exchange Commission (SEC).
Many investors have stayed away from trading investments in digital assets due to the SEC’s regulatory approach, especially after the SEC filed lawsuits against companies it claims are selling unregistered securities.